The Mineral Lien: Part Two

January 18, 2019
By
Jenny Roan Forgey

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In
The Mineral Lien: Part One, we outlined the basics of the mineral lien in Texas oil and gas law.
Several issues can arise when trying to enforce a mineral lien, including
when a debt accrues and whether or not a property description suffices
to attach property to a lien.

The Fifth Circuit Court of Appeals addressed the latter – the sufficiency
of a property description – in
In re Reichmann Petroleum Corp.[1] In this oft-cited, unpublished opinion from 2010, the Fifth Circuit established
the adequacy standard.[2]

Quite simply, a mineral lien claimant may satisfy the adequacy standard
if and when the “description of the property involved [in the statutorily-required
Affidavit of Mineral Lien]…would enable a party familiar with the
locality to identify with reasonable certainty the premises intended.”[3]

As the Court explained in
Reichmann, this standard is even lower than the “legally sufficient”
standard associated with mechanic’s liens.[4]

A mechanic’s and materialman’s lien, referred to as an M&M
lien, is governed by Chapter 53 of the Texas Property Code.[5] To perfect a mechanic’s and materialman’s lien, a claimant
must follow these steps:

File an affidavit with the county clerk of the county in which the property
is located not later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues.[6]

The affidavit must include the following:

Signature of the person claiming the lien;

A sworn statement of the amount of the claim;

The name and last known address of the owner or reputed owner;

A general statement of the kind of work done and materials furnished by
the claimant (for an original contractor) and a statement of each month
in which the work was done and materials furnished (for anyone other than
the original contractor);

The name and last known address of the original contractor;

A description,
legally sufficient for identification, of the property sought to be charged with the lien;

The claimant’s name and address; and

A statement identifying the date each notice of the claim was sent to the
owner and the method by which the notice was sent (this requirement applies
to anyone other than the original contractor).[7]

The person who files an affidavit must send, by registered or certified
mail, a copy of the affidavit to the owner or reputed owner of the property.
If the person filing is not an original contractor, that person must also
send a copy of the affidavit to the original contractor. These notices
must be sent not later than the fifth day after the date the affidavit
is filed with the county clerk.
[8]

As emphasized above, the M&M lien requires a legally sufficient description.
The Fifth Circuit took pains to underscore the difference in this Chapter
53 requirement with the Chapter 56 property description requirement for
a mineral lien in
In re Reichmann when it noted the tiers of description requirements in Texas law:

…[C]ases that involve a conveyance of property…impose a higher
standard than other liens under Texas law…. We note that a mechanic’s
lien, whose standard is less than that required by a conveyance under
the statute of fraud(s), requires a “legally sufficient” description.
But, the description needed to obtain a mineral’s lien is even less
by omitting the “legally sufficient” language and by requiring
only a description of the property involved with the mineral lien.[9]

Section 56.022 of the Texas Property Code requires only “a description of the land, leasehold interest, pipeline, or pipeline right-of-way involved”
in the Affidavit of Mineral Lien.[10]

Fleshing out this distinction, the Fifth Circuit outlined two questions
to ask when attempting to determine what property attaches to the Mineral Lien:

Does the description in the Affidavit “enable a party familiar with
the locality to identify with reasonable certainty the premises intended”?[11]

And, does the information provided in the Affidavit “identify [a]
nucleus of information that would identify relevant leases even without
a complete lease attached”?[12]

According to the Fifth Circuit, if the answer to question one is “yes,”
then the property description is sufficient to attach a mineral lien to
the property described. Further, if the answer to question two is “yes,”
then the mineral lien will attach to an entire leasehold.

Thus, the property description in the Affidavit must adequately describe
the property in order for the lien to attach.

In addition to the property description requirement, the Affidavit must
also include:

A subcontractor must also include the name of the contractor and a statement
that the subcontractor timely served written notice on the mineral property owner.[14]

If the statutory requirements for the contents, notice, and filing of the
Affidavit of Mineral Lien are followed precisely, then a mineral contractor
or subcontractor will obtain a lien on the property that is adequately
described in the Affidavit.

DISCLAIMER: The foregoing information is not legal advice. It is general in nature
and not applicable to all situations. The reader should not rely on these
general statements and should consult with knowledgeable persons before
taking any actions.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
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